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Summary
of Contents
STOCK UPDATE
Grasim Industries
Cluster: Apple
Green
Recommendation: Buy
Price target:
Rs3,150
Current market price: Rs2,251
Consolidating globally
The Aditya
Birla group has announced that it has agreed to invest US$67 million
(Rs311 crore) to buy a controlling stake in the Chinese viscose
staple fibre (VSF) company, Hubei Jing Wei Chemical Fibre (HJW)—a
30,000 tonne per annum (tpa) VSF manufacturer headquartered in the
Hubei province of China. This move will not only give the Indian
conglomerate a straight entry into the fast-growing Chinese textile
market, but also will help the Birla group to consolidate its
position as the largest VSF maker in the world. The Birla group,
which has an annual VSF capacity of 460,000 tonne accounting for a
fifth of the world's market, will fund most of the investment from
its own resources.
Under the agreement with China's HJW, the
Birla group through its three entities, viz Grasim Industries, Thai
Rayon and PT Indo Bharat Rayon will form a joint venture (JV) with
HJW, wherein the Birlas will own 70% and the remaining 30% will be
owned by HJW. The JV will be named Birla Jingwei Fibres Company Ltd
(BJF) and will acquire the existing assets of HJW. Grasim will have
a stake of a little over 30% in the JV. This is the second joint
venture for the Aditya Birla group in China, the first one being
Liaoning Birla Carbon Ltd.
Sun Pharmaceutical
Industries
Cluster: Ugly
Duckling
Recommendation: Buy
Price target:
Rs1,000
Current market price: Rs930
Annual report review
Sun Pharma
has maintained its strong performance consistently. Going forward,
we expect the ramp-up in the US business and the continued momentum
in the domestic formulation business to drive growth. With a strong
ANDA pipeline, we are likely to see an accelerated pace of new
product launches, which will drive the US business. The outlook for
the company's domestic business also remains bright as it operates
in niche, high-margin lifestyle segments, which are growing at
higher-than-industry rates. With the de-merger of the innovative
R&D, Sun Pharma will be insulated with the inherent risks and
uncertainties involving the innovative R&D process. In view of
the above, we believe that the company's valuations will improve
going forward.
At the current market price of Rs930, Sun
Pharma is valued at 27.1x FY2007 and 23.0x FY2008 fully diluted
earnings. The valuations, we believe, do not fully capture the value
that Sun Pharma could command with a ramp-up in its overseas
business, continued momentum in the domestic formulation space, a
de-risked business model and the positive contributions of
acquisitions. In view of the consistent growth and high margins, we
remain positive on the company's future prospects and maintain our
Buy recommendation on the stock with a price target of Rs1,000.
SECTOR
UPDATE
Automobile
Good show
-
Tata Motors: Tata Motors' August sales are
in line with our expectations. The company has reported a strong
26.2% jump in its vehicle sales in August to 45,681 units from
36,205 units in the same month last year.
-
Ashok Leyland: Ashok Leyland's August
sales are ahead of our expectations. The company reported an
overall growth of 37% year on year and of 24% month on month, as
its vehicle sales jumped to 6,483 units in August. Its domestic
sales marked a growth of 29% while the exports marked a brilliant
137%
growth. |
